A Real Estate Broker Must Understand the Statute of Frauds and NJ Contract Law

HNWContract Law, Real Estate, Landlord/Tenant, and Zoning

Statute of FraudsThe statute of frauds requires certain types of real estate agreements to be in writing or the agreement will not be recognized by law.  The relevant sections of the statute of frauds, N.J.S.A. 25:1-16, are as follows:

  1. Except as provided in subsection d. of this section, a real estate broker who acts as agent or broker on behalf of a principal for the transfer of an interest in real estate . . . is entitled to a commission only if before or after the transfer the authority of the broker is given or recognized in a writing signed by the principal or the principal’s authorized agent, and the writing states either the amount or the rate of commission.

The statute of frauds must be strictly complied with.  Lawmakers long ago amended the statute of frauds to deny brokers the right to a commission on a sale of real property unless their authority from the owner to find a purchaser is given in writing.  Accordingly, under section (b) of N.J.S.A. 24:1-16, the real estate broker must have the “writing signed by the principal”.  If a writing is not signed by both parties, section (b) is not satisfied.

In a recent case, based on the parties’ submissions, a judge determined that no written agreement was established between the broker and the customer.  One of the key elements necessary to an agreement is the amount of the commission.  Here, the judge concluded the amount of the commission was never agreed to by the parties.

“The amount of compensation (in this case the commission). . . is an essential term of any contract.”  The NJ Supreme Court has held that a party’s “implied promise to pay a commission is unenforceable if the parties fail to agree on the amount of the commission”).  Because a determination of whether the price was agreed to between the parties is a factual determination, great deference must be given to the trial court’s finding.

To discuss your NJ contract matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Contract Law Attorney

Previous PostNext Post